If a service company is on site and provides services, a simple error can result in millions of damage or even loss of life. When a service company provides services on the assumption that knock-for-knock compensation applies, it might mistakenly think that these potential liabilities are either covered by the operator or covered by the service company`s own insurance policies, although this may not be the case in real cases. This compensation model works fairly well in the oil and gas industry, as the operator and service company are naturally in the best position to guarantee and reduce any risk of « loss » on their own assets, real estate and people. However, over the past decade, operators have repeatedly attacked the knock-for-knock compensation model in order to attribute a greater share of the pollution risk to service companies, damage to wells and damage caused by the hole, wild blowouts/wells (including control and repair costs), damage to an aquifagist or the formation itself, including the loss of oil or gas from it (« waves of damages »). A knock-for-knock agreement is an agreement between two insurance companies that, if the policyholders of both companies suffer losses in the same case of insurance (usually a car accident), each insurer pays the losses incurred by its own policyholder, regardless of who is responsible. Some operators use a direct approach to assign more responsibilities to service companies in Well Damages. They use contractual language that specifically distinguishes different types of corrugated damage from the general Knock-for-Knock compensation provision, to the extent that such damage is caused or caused by mere negligence or gross negligence by the service company. That is because, in order to claim third parties, you have to take the winner to court and it could be a long and costly trial. Insurers also know this and therefore prefer to pay the damages through their own claims coverage rather than relying on the liability insurance of the insurer whose insured client is at fault. This is called the knock-for-knock agreement, and a quick dictionary search defines this term as an agreement between auto insurers that, in the event of an accident, any insurance will pay for the damage caused to the insured vehicle without attempting to determine the culpability of the accident.
A knock-for-knock agreement is not a regulatory requirement, but rather an understanding among insurers. This agreement was developed by the General Insurance Council, an interprofessional organization representing all non-life insurance companies. Thus, each insurer signs a toc-to-knock agreement with all other insurers, and they do so to prevent unnecessary litigation and delays from occurring by taking the case to court because of third-party policies. In addition, a « less is more » approach can rewrite this responsibility to a service company. For example, a service agreement between an operator and a service company with standard knock-for-knock compensation may also include a seemingly harmless exception for all « losses » caused or attributable to the « serious negligence » of the service company. While this type of provision does not clearly indicate that « loss » contains « loss » of well damages, the net effect by omission is the same; the service company is contractually responsible for compensating and defending the operator from and against damages suffered by the operator, which are or are the result of all or part of the gross negligence of that service company. It is customary to exclude the coup for toc compensation provision from the overall ceiling of liability under the contract and from any exclusion of « consecutive losses » (as defined in the agreement). The traditional model of contractual compensation for oil services is called Knock-for-Knock. However, snack agreements have been criticized by insurers as unfair to the party not responsible for an accident.